tv Nightly Business Report PBS August 10, 2010 6:30pm-7:00pm EDT
>> susie: the federal reserve downgrades its take on the economy, saying the recovery has slowed. so, it's taking a step to help get the ball rolling again, but some economists are critical. >> this is a milquetoast policy. it's hard to disagree with it. it's not clearly bad, it's not clearly good. it's just sort of in the middle. >> tom: a look at the fed's plan to buy more government debt, and we ask a regional banker whether today's move will help him lend more money. you're watching "nightly business report" for tuesday, august 10. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
suzanne, federal reserve policymakers said today what everyone's been feeling-- the u.s. economic recovery has slowed down. >> tom, the fed kept interest rates essentially at zerio, and now it's taking a new tack to prime the economic pump. >> tom: the fed plans to take the money it earns on its portfolio of mortgage-backed securities and use it to buy u.s. treasury bills. scott gurvey explains the move. the fed is on a roll, or at least that is the policy. with main street in a gloomy mood, the central bank announced today it will roll over its portfolio of securities. that will keep its balance sheet at record levels, but it will prevent the tightening impact shrinking the portfolio would have on the economy. that doesn't hurt. but economist bob brusca says it doesn't help, either. >> this is a milquetoast policy. it's hard to disagree with it. it's not clearly bad, it's not clearly good. it's just sort of in the middle. it takes a half step towards doing something for the economy at a time when maybe they can only take three quarters of a step at best.
>> reporter: today's closely analyzed statement also removed previous wording noting that foreign economies were weak, and significantly changed the wording on the american economy. in june, the recovery was said to be "proceeding." now, the fed says it has "slowed in recent months." that is not news for anyone who has been looking for work in recent months, or for anyone following the recent series of sluggish economic reports. but, economist julia coronado thinks the doom and gloom has been overdone and the fed's move today should help lift some of the clouds. >> the fact that the fed is not going to stand idly by and let this continue to just stagnate is a good sign. i think it's a sign that the central bank is on the case, and they're not going to let the economy slip into a double dip recession-- that they are going to look for ways to stimulate. >> reporter: and there is no shortage of ideas in that category, from more in the way of direct federal stimulus payments to save the jobs of teachers and other local government workers, to calls for the fed to use its
bully pulpit to goad banks into lending money again. >> we hear stories here and there about banks, particularly local banks, being told that by regulators that they can't lend. well, i think that you really need to look at this policy and try to find ways to put money in the hands of people that at least want to try to do things in this economy, and i don't see anything in this statement that suggests the fed is anywhere along that road. >> reporter: once again, thomas hoenig of the kansas city fed was the only one to vote against today's policy action. he thinks it's time to shrink the fed's balance sheet. scott gurvey, "nightly business report," new york. >> joining us now with his thoughts on today's fed action is kelly king, chairman and c.e.o. of bb&t corporation. bb&t is the tenth largest u.s. bank, and mr. king also serves as a director for the federal reserve bank of richmond. mr. king, welcome to the program. mr. kingwelcome to the program. >> thank you. i'm glad to be be with you. >> suzanne: so today's fed action, how does it
help the economy, do you think? >> well, i think there is not an immediate, direct impact because the freeing up the cash flows being reinvested in treasury bills doesn't directly and immediately impact it very much. it does prevent a restrictive move. it keeps the money back out in the economy. i think maybe more importantly what it will do is, i think, increase consumer and business confidence. i think people are uncertain in terms of where the economy is going. i think the fact that the fed steps up and shares very positively that it is concerned, that it does stand ready and is, in fact, willing to take action to continue to be supportive is very important. so while it is not a major technical change, i think it could be a pretty significant psychological change. >> suzanne: do you agree with the central bank's downgraded assessment of where the economy is right now. is that what you're seeing
in your district? >> yes, i absolutelyly do. in fact, i have said i think about -- i don't know,alit, eight or nine weeks ago, we kind of went into a stall. before that, the economy was clearly moving forward in a positive direction. but for some reason i think we kind of went into a stall. so i think the feds said they thought the growth rate had moderated, and i certainly agree with that. there is so much uncertainty in the marketplace, people have gotten real hesitant to make decisions. that's a result of the lack of confidence in the economy and a stalled economy. >> suzanne: in terms of your business, what are you seeing in the way of loan demand this summer? how is it? >> well, loan demand has been, frankly, relatively soft. i know there is a lot of concern about are the banks willing to make loans. i can certainly tell you from bb&t's prove, we're quite eager to make loans,
and other banks are as well. but there is not a large demand for loans today. i think people are unclear, uncertain about the direction of the economy, and so they're holding back. so loan demand is not very strong at all. >> suzanne: what about small business lending? we keep hearing stories from all of the small businesses that we go to and they say they're having trouble accessing money to help their small businesses. >> wer making a number of small business loans. we've had a focus in the small business area for a very, very long time. we do an awful lot of small business direct lending. and when clients can't qualify completely on their own, we try to use ot programs to help, particularly f.d.a. but, again, the rate of lending today versus say two or three years ago is very, very tepid.
and, again, it is because small businesses in many cases are struggling, having difficulty. many businesses have gone out of business. and others are hesitant to invest. so while we are very eager to make small business loans, i say we are not making as many as we would like. >> suzanne: how concerned are you that the economy is headed into another recession or a double ditch. maybe not this year, but next year. do you think that is a strong possibility? >> i do not believe it is a high probability of a double dip. i've been quite interested in a lot of the conversation that people have had, particularly the last couple of weeks, about we're getting ready to slip into a double dip, into a recession again. i think that is extraordinarily unlikely. the fact that we're in a stall, a moderation in the growth rate of the economy is not terribly surprising. remember, the recession we have just come out of was
an extraordinarily deep recession. much greater than we've had in many decades. so when you have such a deep slice into the economy, it should not be expected for the economy to return, you know, rob robustly immediately. rather, what we're seeing is quite normal. it is beginning to sputter, recover, and it has kind of stalled a little because of uncertainty. but the underpentup demand is out there for the fed to grow. the fed has put monetary and fiscal sti stimulus into the economy. i think the economy is poised to grow when some of the uncertainty recedes. >> suzanne: thank you, i think we have to leave it there. >> thank you very much. >> suzanne: my guest this evening, mr. kelly king, chairman and c.e.o. of bb&t. >> tom: here are the stories in
tonight's n.b.r. newswheel: today's fed action helped wall street cut its early losses, the dow ended down just 54 points, the nasdaq lost 28 and the s&p 500 was off six. volume picked up from yesterday's anemic trading, 980 million shares on the big board. the nasdaq was back above the two billion mark. it looks like swine flu is history. the world health organization said the h1n1 flu has run its course, and declared the pandemic officially over. after months of investigations, the transportation department has not found safety defects to explain sudden acceleration found in some toyotas. the agency blames driver error for the problem. former alaska senator ted stevens and four other people died in a small plane crash 300 miles southwest of anchorage. also on board, the north american head of defense contractor e.a.d.s., shawn o'keefe, and his son. both survived. >> tom: still ahead, don't fight the fed, and be defensive. that's the game plan from market strategist bob walberg; he joins us for tonight's "word on the
street." relief will soon be on the way for teachers and government workers in cash-strapped states. late today, president obama signed a $26 billion aid bill into law. hours earlier, in a special session of congress, house lawmakers approved it. the measure provides $10 billion to save teaching jobs and $16 billion to pay medicaid bills, without adding to the deficit. but republicans, like california congressman jerry lewis, voted against it, saying americans are sick and tired of government bailouts. >> the voters do not want us to throw money, more money, at the nation's problems, yet that is exactly what this bill does. it's time, mr. speaker, to put uncle sam on a diet, and put an end to the congressional spending spree. >> suzanne: meanwhile, in florida's biggest school system, the state aid bill will save hundreds of teaching jobs. miami-dade is also the nation's fourth largest public education group, with 342,000 students in over 400 facilities.
the county's been hit hard by a drop in tourism, and falling property values. school superintendent alberto carvalho says, in florida, children are victims of the recession. >> we are at a point where the cliff is before us, and right now, if this funding stream were not to arrive, we probably would not be able to rehire about 800 teachers, brand new teachers, some of the most qualified, energetic, driven people back into the classroom. >> suzanne: to pay for those teachers, carvalho thinks his district will get about $73 million from the state aid bill.
>> tom: while the three major indices were each down, the federal reserve announcement in the mid-afternoon lifted them off their lows. the s&p 500 spent the entire trading day in the red. the drop in productivity set the weak tone early, but stocks came off their lows when the federal reserve announced it would buy u.s. government bonds, hoping to jump-start the economy. the fed's shift in strategy to buy treasury bonds sent the bond market rallying, and interest rates dropping. the yield on a ten-year
government bond is at its lowest level in more than a year. with interest rates dropping, it may not be a surprise investors went looking for yield elsewhere-- that meant utilities. here's the utility exchange traded fund. volume was slightly heavier than usual, even though total market volume was light. tonight's close is near its january high. pepco, progress and ameren are among the highest yielding utility stocks within the s&p 500 sector. each of them pays around 6%. pepco and progress are electric utilities on the east coast. pepco is close to a new high. progress is at a 52-week high. ameren is based in st. louis. while investors went looking for dividends, they avoided growth sectors, with technology and financial stocks dropping. semiconductor giant intel led the way lower. it was the worst-performing dow industrial component, falling 4% to close at a four-week low. several of the analysts cut their financial forecasts, saying august p.c. sales are off to a slow start.
the chip analyst at robert baird finds sales for notebook computer parts slowed considerably the first week in august. j.p. morgan finds, in taiwan, p.c. orders "falling off a cliff." and barclay's chip analyst thinks the sales growth forecasts for semiconductor makers will be elusive. advanced micro devices, graphic chip maker nvidia and texas instruments all fell on the pessimism. after the close, disney turned in a much better-than-expected performance. its fiscal third quarter beat the street by nine cents per share. a strong showing at the box office from "toy story three," "iron man two" and "alice in wonderland" helped. its biggest business unit is its abc television and espn where profits jumped 43%. disney shares came into the report at their highest price since may. after hours, the stock added about 1%. speaking of entertainment, netflix has a new partner for its online, on-demand movie service that starts next month. epix is a pay cable movie channel.
it is a joint venture between viacom, lionsgate entertainment and m.g.m., giving netflix's new service a big film library. shareholders are hopeful, pushing the stock up almost 7% on heavy volume. it's about three dollars below a new all-time high. this deal gives netflix the ability to offer movies online three months after they appear on pay cable channels. a few other notable moves in fashion, finance and mining. watch retailer fossil profit more than tripled, easily beating expectations. it also raised its outlook. c.v.b. financial received a subpoena from the securities and exchange commission, focused on how it handled troubled loans. and miner jaguar mined less gold than expected thanks to production problems at its brazilian mines. and that's tonight's "market focus."
tonight we continue our segment with thestreet.com, looking at investment ideas ranging from mutual funds and e.t.f.'s to small-cap and under-the-radar stocks. we call it "word on the street." and tonight's word? defensive. bob walberg is chief market strategist at thestreet.com. bob, welcome to "nightly business report." >> it's good to be here, tom. thank you very much. >> tom: we have the federal reserve keeping interest rates low. why been defensive in that environment? >> i think it is an acknowledgement right now that the fed is pretty much on hold, and it is not having a defining direction one way or the other, raising or lowering rates, and consequently, i think we're confined to a
range we've been in in the last couple of months. we're near the top of that range. i think stocks are more likely to come down over the next 30, 60 days. i think you need to be defensive. >> tom: being defensive at this points, with the fed clearly trying to get the economy reignited, is that fighting the federal reserve efforts or is it not fighting them? >> i don't think it is an acknowledgement that you're fighting the federal reserve. the fed right now doesn't have many tools at its disposal to jump-start the economy. it basically brought the interest rates down to zero. and it has very little impact on improving demand. consequently, you're going to see the economy staying pretty much stagnant, and that's why i think you're looking at buying defensive, large cap leaders. >> tom: you brought three of them on the street. beginning with boeing. boeing. why risk it and go b.a. >> i think the sector is improving considerably. i believe you're at the
beginning of what is going to be a long up cycle for the commercial airline industry in terms of orders. i think you're buying boeing on that strength, and the stock is ba paying about 2.5% dividend. >> tom: almost the same as a 10-year government bond. apple -- almost $260 a share. what's the next catalyst? >> i think apple will have another great year over the next two to three-quarters. i think you'll see a pretty strong holiday season. apples, and ipods. a great company to own, especially in uncertain times. >> tom: already making a holiday play even before labor day. you've got best buy, a consumer electronics retailer and resales apple products. but a couple of bucks above a 52-week low.
why bb y.? >> the best by is evaluation. you're buying the stom to put it in your back pocket for the next 12 to 14 months. ver cheap by historical standards. there is a concern about how the holiday season is going to play out for electronics. if i'm right, i think you'll see the stock make a strong move into the low 40s. >> tom: any disclosures for this? >> we don't any of them right now, tom. >> tom: you can read bob's article at the thestreet.com. it is robert walberg, the strategist at thestreet.com. >> suzanne: here's what we're watching for tomorrow: quarterly results from cisco systems and macy's. and the commerce department reports on international trade for june. also, we'll hear about the u.s. unit of global conglomerate siemens. it powers over a third of u.s. electricity. we'll ask c.e.o. eric spiegel about how siemens plans to make clean energy a dominant power
source. >> suzanne: despite high unemployment, consumers are still shopping online. new data out today show e- commerce is a bright spot for the retail sector. internet tracking firm comscore says online sales jumped to nearly $33 billion in the second quarter. that's 9% higher than a year ago. consumer electronics, computers and software remain the most popular items on the net. >> tom: florida's attorney general is suing some of the world's largest makers of l.c.d. screens. those are the flat screens used in high-tech t.v.'s, cell phones and laptops. bill mccollum alleges the defendants, like samsung, sharp, toshiba and hitachi, conspired to boost prices. last week, new york's attorney general filed a similar lawsuit. so far, the manufacturers have not commented on the allegations.
>> suzanne: when it comes to boosting the economy with stimulus spending, tonight's commentator thinks uncle sam should do more, not less. he's daniel gross, senior editor at newsweek. >> the conventional wisdom says president obama and the democrats may be in trouble in this fall's midterm elections because they've tried to do too much on the economy. the stimulus package, health care reform, financial reform-- too much action and too few results.
after all, unemployment remains at 9.5%. but the conventional wisdom is wrong. president obama's problem, in fact, may be that he has done too little on the economy-- on both fiscal policy and monetary policy. from the beginning, many economists warned that the $787 billion stimulus package, designed to roll out over three years, was too small, especially given that the economy was shrinking at a 6% annual rate. in fact, the obama team had originally proposed a package closer to $1 trillion-- it was cut in size as part of an effort to get a few republican votes. too small at the outset, the original package hasn't been followed by further aggressive stimulus. in the absence of new fiscal stimulus, the federal reserve will be the vital player in providing aid to the lackluster economy. but the obama administration has been slow to place allies in positions of authority at the fed. two of the seven seats on the fed's board of governors-- positions appointed by the
president-- have been vacant during obama's presidency. and while fed vice chairman donald kohn, the second in command, retired in june, his replacement, janet yellen, has yet to be seated. it seems the fierce urgency of now has been replaced by the fierce urgency of whenever. i'm daniel gross. >> suzanne: finally tonight: a new way to bet on getting "a's" in school. an online company called ultrinsic is letting college students gamble on their academic success. here's how it works: students register with the site, upload their classes and provide access to their school records. based on a school's history, and difficulty of its classes, ultrinsic calculates the odds of a specific grade. the students can then place their bets. ultrinsic says it's an incentive to study harder. four ivy league schools, including harvard, are among the 36 colleges participating. and, tom, you know what i want to know? how much can you win if you get an "a"? >> tom: maybe you can win enough to pay for that semester's worth of classes. how about that? >> >> suzanne: that would
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